<p><div class="KonaFilter image-container display-table"><div><div class="image on-image"><p class="source"><span>Joshua Roberts/Reuters</span></p><p class="caption">Fed Chair Janet Yellen</p></div><p></p></div></div></p><ul><li><strong>The Federal Reserve at 2 p.m. ET will release its latest policy decision in a statement.</strong></li><li><strong>The Fed is not expected to raise interest rates, but may hint that it will consider doing so at its meeting in December. </strong></li><li><strong>Wednesday's statement is overshadowed by President Donald Trump's announcement of his nominee for Fed chair, which is expected on Thursday. </strong></li></ul><p> </p><p>The Federal Reserve at 2 p.m. ET will release its interest-rate decision and policy statement after a two-day meeting in Washington. </p><p>The Fed's not expected to announce another interest-rate hike, and its statement is likely to be similar to the September release with a few tweaks. It could signal that it plans to consider raising its benchmark rate at the December meeting. Futures traders saw a 0% chance of a hike on Wednesday, and an 85% chance in December, according to Bloomberg's world interest rate probability. </p><p>In the statement, the Fed may say that recent hurricanes temporarily disrupted the economy; for example <a href="http://www.businessinsider.com/jobs-report-september-2017-10">nonfarm payrolls</a> contracted in September for the first time in seven years. But the Fed would add that it expects the economy to continue expanding at a moderate pace that calls for only gradual interest-rate increases. </p><p>The Fed could also acknowledge that inflation still runs below its 2% objective, but should soon stabilize around that target. </p><p>The bigger Fed story this week is President Donald Trump's announcement Thursday of his nominee for chair of the Fed board. On Wednesday, Trump said Chair Janet Yellen, whose first term ends in February, was "excellent," but didn't say that he would reappoint her. Multiple outlets have reported he plans to nominate Fed Governor <a href="http://www.businessinsider.com/fed-chair-jerome-powell-trump-likely-announcement-2017-10">Jerome Powell</a>, who aligns with many of Yellen's policy views.   </p><p><a href="http://www.businessinsider.com/fed-statement-november-2017-11">More to come, refresh this page for updates ...</a></p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/the-bottom-line-market-warning-bitcoin-debate-facebook-amazon-google-tesla-uber-2017-10">THE BOTTOM LINE: A market warning, the big bitcoin debate and a deep dive on tech heavyweights</a></h3>        <div>                    </div>    </div>

Here comes the Fed ...

<p><div class="KonaFilter image-container display-table"><div><div class="image on-image"><p class="source"><span>Joshua Roberts/Reuters</span></p><p class="caption">Jerome Powell testifies before the Senate Banking, Housing and Urban Affairs Committee on his nomination to become chairman of the U.S. Federal Reserve in Washington, U.S., November 28, 2017.</p></div><p></p></div></div></p><ul><li><strong>Market expectations of higher inflation have ratcheted up following the passage of the Republican tax cut legislation.  </strong></li><li><strong>The Federal Reserve is likely to acknowledge this pick-up in its post-meeting policy statement, although no move on rates is expected.</strong></li><li><strong>Any hints of renewed Fed concern about inflation could further upset the bond market, which in turn might be bearish for stocks.</strong></li><li><strong><span>"We believe rates across the curve are headed higher," write Bank of America-Merill Lynch strategists in a research note. </span></strong></li></ul><p><br />The Federal Reserve is all but set to keep interest rates on hold at this week's policy meeting, forcing traders to turn their attention to the central bank's statement for any changes in the language that signal something about the likely pace of interest rate hikes this year.</p><p>The Fed's own forecasts point to three rate increases in 2018, but financial markets are starting to worry the central bank might be inclined to tighten monetary policy more quickly if, as some expect, the recent tax cut legislation gives growth a temporary boost, pushing up inflation with it.</p><p>Keep in mind, the Fed has been falling short of its inflation goal for most of the economic recovery, so reaching the inflation target quicker would be a good thing from the perspective of workers and the economy.</p><p>However, for investors trying to gauge the investment environment a few months hence, initial excitement over the tax cuts, which has propelled stocks to repeated record highs, can quickly devolve into fears of a more aggressive Fed.</p><p><span>The Fed's policy-setting Federal Open Market Committee "</span><span>is likely to send a modestly hawkish signal as FOMC officials become more convinced of the shift from the disinflation of 2017 and emphasize the momentum in the real economy," write interest rate strategists at Bank of America-Merrill Lynch in a research note.</span></p><p>That could hit equity prices, already under pressure this week from concerns over rising bond yields, although it could <a href="http://www.businessinsider.com/dollar-slump-key-to-fed-will-boost-inflation-in-all-the-wrong-ways-2018-1">support a battered US dollar.</a><span> </span></p><p><span>"We also expect the FOMC to alter the language around inflation expectations, particularly market-­based measures," the BofA-Merrill note adds, citing a "decisive increase" in the gap between five-year notes and inflation-protected bonds of the same maturity, as pictured in the chart below. The Fed will release a statement following its two-day meeting at 2 p.m. ET Wednesday.</span></p><p><span><div class="KonaFilter image-container display-table"><div><div class="image on-image"><p class="source"><span>Bank of America-Merrill Lynch</span></p></div><p></p></div></div></span></p><p><span>This is Janet Yellen's last meeting as Federal Reserve chair as she becomes the central bank's first leader in modern history <a href="http://www.businessinsider.com/trump-picked-powell-over-more-qualified-yellen-2017-11">not to be appointed for a second term</a> after President Donald Trump decided to <a href="http://www.businessinsider.com/the-senate-voted-to-confirm-jerome-powell-as-the-new-fed-chair-2018-1">give the job to Fed Governor Jerome Powell</a>. The Fed has raised interset rates five times since December 2015, after keeping them at effectively zero for seven years, to the current 1.25% to 1.5% range.</span></p><p><span> It has also started to reduce the size of its balance sheet by no longer reinvesting the principal on maturing bonds, which traders say is set to put further upward pressure on longer-term Treasury yields, which move opposite to their price. </span></p><p><span>Looking further ahead, the strategists expect the push toward higher yields to continue, which likely has bearish implications for stocks.</span></p><p><span>"Beyond this meeting, we believe rates across the curve are headed higher. The combination of easier fiscal policy, higher deficits, greater Treasury supply, and building inflation expectations should result in a further increase in five- to 10-year rates," they said. </span></p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/microsoft-president-brad-smith-davos-interview-trump-us-cant-get-too-isolationist-2018-1">Microsoft President Brad Smith says the US shouldn't get 'too isolationist'</a></h3>        <div>                    </div>    </div>

Wall Street is counting on a key pivot from the Fed that could rattle stocks

<p><div class="KonaFilter image-container display-table"><div><div class="image on-image"><p class="source"><span>Joshua Roberts/Reuters</span></p><p class="caption">Jerome Powell testifies before the Senate Banking, Housing and Urban Affairs Committee on his nomination to become chairman of the U.S. Federal Reserve in Washington, U.S., November 28, 2017.</p></div><p></p></div></div></p><ul><li><strong>The Federal Reserve is considering a key milestone in its public communication about the path of interest rates.</strong></li><li><strong>Wall Street economists think a language change is coming that will signal monetary policy is no longer loose, meaning interest rates are no longer seen as particularly low.</strong></li><li><strong>This week's meeting may be too soon; it's more likely such a shift will come in September, when the Fed is next expected to raise interest rates.</strong></li></ul><p><span>Federal Reserve officials meeting this week are grappling with an important milestone in their effort to raise interest rates gradually without derailing the economy: When to tell the world that interest rates are no longer all that low - or more accurately, that monetary policy is no longer "loose."</span></p><p><span>This is how the internal debate at the US central bank was characterized in minutes to the <a href="https://www.federalreserve.gov/monetarypolicy/fomcminutes20180613.htm">Fed's June meeting</a>. </span></p><p style="padding-left: 30px;"><span>"Many (officials) noted that, if gradual increases in the target range for the federal funds rate continued, the federal funds rate could be at or above their estimates of its neutral level sometime next year. In that regard, participants discussed how the Committee's communications might evolve over coming meetings if the economy progressed about as anticipated; in particular, a number of them noted that it might soon be appropriate to modify the language in the post-meeting statement indicating that the stance of monetary policy remains accommodative."</span></p><p><span>Ward McCarthy, Jefferies chief financial economist, says he does not expect any tweaks to come at this week's meeting, which is also not expected to yield another interest rate hike.</span></p><p><span>"How soon is soon? We think that August 1 is too soon," he writes in a research note. "</span><span>However, we cannot preclude the possibility that the FOMC alters the language in the August 1 policy statement to set the stage for the modification of the phrase 'the stance of monetary policy remains accommodative.'"</span></p><p><span>But McCarthy adds: "The most efficient change on August 1 would be to change the statement to 'the stance of monetary policy remains accommodative for now.'"</span></p><p><span>The Fed has raised interest rates several times since December 2015 to a range of 1.75% to 2%. That may seem low historically, but comes in the context of an employment recovery that has taken so many years to make up the ground lost during the Great Recession. </span></p><p><span>Morgan Stanley economist Ellen Zentner and her colleagues are on the same page on the likely timing of the Federal Open Market Committee's language shift:</span></p><p><span>"We do expect that after raising rates at the September meeting, the FOMC may look to adjust its assessment that the stance of policy 'remains accommodative,' but that reference is likely to remain unchanged in the August statement for now," the bank's economists write in a research note. </span></p><p><span>"The bulk of the changes we expect will be a mark-to-market in the section describing current economic conditions to reflect recent data."</span></p>     <div class="margin-top">        <h3>NOW WATCH: <a href="https://www.businessinsider.com/why-cities-can-not-get-rid-of-rats-2018-6">Why cities can't get rid of rats</a></h3>        <div>                    </div>    </div>

The Fed is struggling with one key sentence in its post-meeting statement

<p><div class="KonaFilter image-container display-table"><div><div class="image on-image"><p class="source"><span>Reuters/Joshua Roberts</span></p><p class="caption">Jerome Powell testifies before the Senate Banking, Housing and Urban Affairs Committee on his nomination to become chairman of the U.S. Federal Reserve in Washington, U.S., November 28, 2017.</p></div><p></p></div></div></p><ul><li><strong>Wall Street has some trust issues with the Federal Reserve - they don't quite believe the central bank's indication that it will keep rates low even as the economy recovers.</strong></li><li><strong>A sharp reassessment of expectations for Federal Reserve interest rate hikes has helped drive the market's steep losses. </strong></li><li><strong>Officials have so far dismissed the market's turbulence as a natural and perhaps even healthy adjustment for a stock market that had rallied very far very fast.</strong></li><li><strong>Roberto Perli, a former Fed economist and founder of Cornerstone Macro in Washington says the comments "miss the point, because they treat recent market action as if it happened in a vacuum and was independent of perceptions of Fed policy."</strong></li></ul><p><span><br />The Federal Reserve has a communications problem.</span></p><p><span>Key to Wall Street's precipitous dive over the past week have been rather sharp readjustments for market expectations of more Fed interest rates increases than previously anticipated. </span></p><p><span>This suggests that, in spite of repeated reassurances from Fed officials that its monetary tightening is gradual and not intended to choke off the economic recovery, policymakers are not doing a very good job at getting their message across. </span></p><p><span>Officials have so far dismissed the market's turbulence as a natural and perhaps even healthy adjustment for a stock market that had rallied very far very fast. </span></p><p><span>Outgoing New York Fed President William Dudley, a former Goldman Sachs banker, was dismissive of the market's wipe out, <a href="https://www.cnbc.com/2018/02/08/dudley-market-drop-is-small-potatoes-economy-still-strong-rates-going-up.html">calling it "small potatoes."</a> Amid a string of sharp declines, the Dow Jones industrial has posted two-days of four-digit losses, including the biggest ever point drop on the index. Dallas Fed President Robert Kaplan, also ex-Goldman, was similarly optimistic, <a href="https://www.cnbc.com/2018/02/07/feds-kaplan-says-the-market-correction-is-healthy-and-sees-no-impact-on-the-economy.html">describing the selloff as "healthy."</a></span></p><p><span>Roberto Perli, a former Fed economist and founder of Cornerstone Macro in Washington says the comments "miss the point, because they treat recent market action as if it happened in a vacuum and was independent of perceptions of Fed policy."</span></p><p><span>In fact, "markets are reacting to fears of a resurgence in inflation and fears that the Fed might respond aggressively to such resurgence," Perli writes in a research note to clients. </span></p><p><span>"The recent market volatility is related to Fed policy because it is largely due to fears of inflation and fears that the Fed will overreact to rising inflation," Perli, said, although he does not believe such fears will materialize. "In the past, whenever the Fed pushed the funds rate enough above its neutral level, a recession followed not too long after."</span></p><p><div class="KonaFilter image-container display-table"><div><div class="image on-image"><p class="source"><span>Cornerstone Macro</span></p></div><p></p></div></div></p><h2>The Fed's 'self-inflicted wound'</h2><p><span>The market's abrupt adjustment comes despite repeated reassurances from Janet Yellen, and even the policy-setting Federal Open Market Committee itself, that </span><span>the Fed "expects that economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, <a href="https://www.federalreserve.gov/newsevents/pressreleases/monetary20180131a.htm">below levels that are expected to prevail in the longer run.</a>" </span></p><p><span>So why don't markets buy it? Because of a mix of past experience, a very recent change of guard with the takeover of Jerome Powell at the helm and, and concerns that <a href="http://www.businessinsider.com/feds-kashkari-says-job-market-not-as-strong-as-it-looks-2017-12">the 2% inflation target is in fact a ceiling</a>. </span></p><p><span>That is, <a href="http://markets.businessinsider.com/news/stocks/fed-rate-hikes-may-be-hurting-growth-damping-inflation-2017-10-1004500846">the Fed has tolerated inflation below 2% for so long</a>, most of the economic recovery, in fact, that market participants have come to believe officials will freak out and tighten policy more aggressively as soon as the target is on the horizon. </span></p><p><span>Indeed, the selloff first started last Friday after the latest employment report showed average hourly earnings climbing at an annual pace of 2.9%, the strongest showing since the recession. </span></p><p><span><a href="http://www.businessinsider.com/activist-battling-als-opposes-tax-cut-bill-healthcare-cuts-2017-12">Ady Barkan, founder of the Fed Up movement</a> and long-time advocate for a low interest rate policy to help lower-income communities at the Center for Popular Democracy, told Business Insider "there is zero reason for the market to be reacting negatively to wage growth."</span></p><p><span>The problem is of the central bank's own making, a "self-inflicted wound" created by excessive worries about inflation and not enough of a focus on the employment side of its mandate, Barkan said.</span></p><p><span>"The Fed is so afraid of inflation that everybody thinks they're going to intentionally slow down the economy in response to wage growth," he said.  </span><span>"With a better Fed that was willing to speak publicly and affirmatively about the benefits of wage growth and the genuinely symmetric nature of the inflation target, we would not have this market volatility."</span></p><p><span>One Fed official has emerged with such a message. Asked about the market volatility and its relationship to the wage growth figure, Neel Kashkari, president of the Minneapolis Fed, told Business Insider this week:</span></p><p><span><a href="http://www.businessinsider.com/fed-kashkari-on-stock-market-strong-economy-2018-2">"If wages are finally growing, that's a net positive for the economy.</a></span><span> Certainly, it's a positive for workers. So I'm not too focused on the stock market's gyrations."</span></p><p><span><div class="KonaFilter image-container display-table"><div><div class="image on-image"><p class="source"><span>Cornerstone Macro</span></p></div><p></p></div></div></span></p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/microsoft-president-brad-smith-davos-interview-trump-us-cant-get-too-isolationist-2018-1">Microsoft President Brad Smith says the US shouldn't get 'too isolationist'</a></h3>        <div>                    </div>    </div>

A Fed official called the stock market's plunge 'small potatoes' - but those comments miss the point

<ul><li><strong>Stocks are down sharply in the last two days. I look at three possible reasons why.</strong></li><li><strong>One story is happy: Maybe faster business expansion and more competition for workers will hurt corporate profits but will lead to better deals for workers and customers.</strong></li><li><strong>Maybe investors are worried that central banks will raise interest rates.</strong></li><li><strong>Most worryingly: Maybe higher budget deficits mean we'll need higher interest rates, regardless of what central bankers are thinking.</strong></li></ul><p>So, why are stocks down 1,700 points in two trading days? Nobody really knows, but it's always fun to guess.</p><p>I see three big stories out there, with very different implications for the real economy. Here they are, in order from most to least optimistic.</p><p><div class="KonaFilter image-container display-table"><div><div class="image on-image"><p class="source"><span>CNBC</span></p><p class="caption">CNBC's Jim Cramer winced near the end of the trading day on February 5, 2018.</p></div><p></p></div></div></p><h2>1. Stocks are down because faster business expansion and wage growth will push down profit margins</h2><p>Under this theory, stocks are falling because the economy is good. This is the most optimistic story, and Bloomberg's Joe Weisenthal <a href="https://twitter.com/TheStalwart/status/960600380882157574">suggests President Trump should embrace it</a>. </p><p>Here's the claim: Because the economy is improving, firms are going to expand, and with higher capacity, they're going to have to cut prices to get enough customers. And they're going to have to pay higher wages to get the workers they'll need to handle that expansion.</p><p>All that competition for workers and customers is going to mean lower prices, higher wages, and lower corporate profit margins, so stocks are down.</p><p>It's a happy story about the broader economy. But is it true? <br /><br />If so, it would be a reversal of a key economic story of the last nine years of recovery: As the economy rebounded, firms were conservative about expansion, preferring to enjoy high profit margins rather than to expand in search of more market share.</p><p>The most obvious data point in favor of the workers-up-owners-down story is Friday's jobs report, which came out right before the two-day stock bloodbath and showed wage growth up to 2.9%, the highest since 2009. Maybe firms finally are so eager to expand they're willing to pay higher wages, and maybe that's what terrifies the markets.</p><p>Another hint of this story came <a href="http://www.latimes.com/business/la-fi-united-continental-airfares-20180124-story.html">a couple of weeks ago</a>: United Airlines announced it would expand capacity, which led to tanking stocks across the airline sector out of fear of price wars. As an airline customer, you like price wars. As a shareholder, you do not. </p><h2>2. Stocks are down because improving economic data will lead central banks around the world to raise interest rates</h2><p><div class="KonaFilter image-container display-table"><div><div class="image on-image"><p class="source"><span>Joshua Roberts/Reuters</span></p><p class="caption">Jerome Powell testifies before the Senate Banking, Housing and Urban Affairs Committee on his nomination to become chairman of the U.S. Federal Reserve in Washington, U.S., November 28, 2017.</p></div><p></p></div></div></p><p>As wage growth accelerates, central bankers are likely to become nervous about inflation. Or, they might just feel the opportunity has arisen to "normalize" rates, which will give them room to cut them again if the economy starts to soften.</p><p>Either way, it means the bankers will react to good economic news by hiking rates.</p><p>Those higher interest rates will make it more expensive for companies to invest and grow. Higher interest rates may also make stocks a less appealing asset on a risk-adjusted basis; why hold a stock with an expected annual yield of 8% when yields on safer bonds have gone up from 4% to 6%?</p><p>For investors to continue to find stocks appealing in the higher-interest-rate environment, the price-earnings ratio will have to be lower, which is to say the stock price will have to fall.</p><p>This seems to be the most popular story of what the markets are doing, and the 10-year Treasury bond yield has indeed been rising for the last month. </p><p>But there's at least one obvious question that arises with this reasoning: For most of the last month, as those yields were rising, stock prices were also rising. What changed in the last few days?</p><p>Also, discussion of this story sometimes seems to assume central bank actions are arbitrary. But what if there are good reasons that interest rates have to go up? That leads me to the third story.</p><h2>3. Stocks are down because competition for scarce capital will lead to higher interest rates</h2><p>The Tax Cuts and Jobs Act was a strange piece of pro-cyclical economic legislation: Near the top of the economic cycle, the US government enacted a large, deficit-financed tax cut. This year, the federal government will need to borrow $1 trillion to meet its obligations, in large part due to this law.</p><p>We've gone through a strange, 20-year period where it's mattered very little how much money the US government borrows. Demand for government bonds has been endless, and very low interest rates have coexisted with very high budget deficits. There has recently been little to no economic blowback from government borrowing.</p><p>But back in the dark ages, politicians used to spend a lot of time talking and worrying about the link between government borrowing, interest rates, and private investment.</p><h2><div class="KonaFilter image-container display-table"><div><div class="image on-image"><p class="source"><span>AP Photo/Marcy Nighswander</span></p><p class="caption">Deficits used to be something that people cared about as a substantive economic matter, not just a way to score political points.</p></div><p></p></div></div></h2><p>If you look at <a href="http://www.nytimes.com/1992/10/12/us/the-1992-campaign-transcript-of-first-tv-debate-among-bush-clinton-and-perot.html?pagewanted=all">a transcript of the first 1992 presidential debate</a>, there's a lot of worry and argument about the link between deficits and interest rates. And, both George H.W. Bush and Bill Clinton signed major budget packages with the key goal of shrinking the federal budget deficit and allowing long-term interest rates to decline. They had some success, too.</p><p>What if we're back in that world - where the tax cut is pumping money into the economy, but also forcing the federal government to borrow hundreds of billions of extra dollars, at the same time that there is finally an increasing impulse for business investment?</p><p>The government and expanding companies are bidding against each other for a limited pool of capital. That should make investors choosy, and should lead to higher interest rates and lower price-earnings ratios. <br /><br />To put that another way: in this setting, stock prices should fall, bond yields should rise, and the cost of investment capital should increase.</p><p>That higher cost of capital will discourage investment, just at the same time that lower tax rates and perhaps an improved outlook for growth are encouraging it. The tax cut will undermine its own benefits, as increased government borrowing drives up interest rates.</p><p>Economists would have told you that effect was going to show up in the long run, which is why economic models of the tax bill tended to show more negative results the farther into the future you looked, as increased government debt had a negative effect on the economy. <br /><br />But the less slack that exists in the economy to begin with, the faster the effects of higher government borrowing should be seen.</p><p>This, obviously, is the most negative of the three stories.</p><p>So, which story is right? I don't know. Probably all three, in some combination.</p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/microsoft-president-brad-smith-davos-interview-trump-us-cant-get-too-isolationist-2018-1">Microsoft President Brad Smith says the US shouldn't get 'too isolationist'</a></h3>        <div>                    </div>    </div>

Here are 3 theories about why stocks are puking, and what they mean for the economy

<p></p>                     <ul><li><strong>Business Insider recently caught up with Nobel Prize-winning economist and New York Times columnist<a href="https://www.nytimes.com/column/paul-krugman"> Paul Krugman</a> to talk taxes, Trump, and <a href="http://markets.businessinsider.com/currencies/BTC-USD">bitcoin.</a></strong></li><li><strong>Krugman is skeptical about the impact of the Trump administration's tax plan. </strong></li><li><strong>"Will workers see their wages increase in a way that anyone will notice over the next five years? No," he said. </strong></li><li><strong>He expressed concern about some of the candidates for the Fed board, <a href="http://www.businessinsider.com/who-is-fed-nominee-marvin-goodfriend-2017-12">such as Marvin Goodfriend</a>. </strong></li><li><strong>He said any disruption of NAFTA could be a "hugely costly thing."</strong></li><li><strong>He also said that bitcoin is an obvious bubble. </strong></li></ul><p><em><br />Following is a transcript of the video interview as aired on "The Bottom Line." It has been edited for clarity.</em></p><p><strong>Josh Barro</strong>: Let's talk about this tax bill that seems to be rocketing it's way toward enactment in Washington. We got an analysis this week from the Treasury Department, <a href="http://www.businessinsider.com/treasury-report-trump-gop-tax-reform-bill-analysis-2017-12">this one page sheet that claims Trump's economic policies - including this tax plan - should increase economic growth</a> so much that in fact budget deficits will shrink despite the large size of this tax cut. Is this a plausible analysis?</p><p><strong>Paul Krugman</strong>: So this is an analysis with scare quotes because the number comes out of thin air; they just made it up. They said "we're going to increase growth by seven-tenths of a percentage point," which doesn't sound like that much.</p><p><strong>Barro</strong>: Each year?</p><p><strong>Krugman</strong>: So over ten years, GDP is going to be seven percent larger. They have no explanation of where that comes from. They told the Treasury staff to assume that growth rate and tell us what it does for the budget deficit.</p><p>First of all, it's about nine-times as big as the Joint Committee on Taxation, which is Congress' official evaluator, says we're going to get out of these tax bills. And it's just a crazy number. Advanced economies like the United States, at the technological frontier, with not completely crazy economic policies, there's almost nothing the government could do, the most ideal policy in the world isn't going to boost GDP by seven percent. This is crazy.</p><p><strong>Barro</strong>: There have been a variety of analyses come out. You've talked about the Joint Committee number that found this modest-but-positive effect on economic growth. There was also an analysis by the Tax Policy Center, which is a joint project by two sort of left-of-center think tanks in Washington. Their analysis also finds a very modest positive effect on the economy. Do you think this is right? Will this tax plan be growth positive compared to doing nothing at all?</p><p><strong>Krugman</strong>: There are two questions here. One is that none of these studies are very good at dealing with the impact of what the deficit itself actually does to growth. Deficits famously were not a problem during a depressed economy but now that we're close to full employment there may be some negative. There's another subtler issue that none of these organizations, the Tax Policy Center are great people, but there's something I don't think they've got a great handle on, which is growth in <em>what</em> exactly?</p><p>What they find is that Gross Domestic Product, which is what we usually talk about, it will be bigger. But the way that happens is by increased inflows of foreign capital. That means that we have a bigger capital stock, which means that we produce more, but it also means that we pay more profits to foreign companies. Also, about a third, we think, of the corporate tax cut benefit to after-tax corporate profits will actually go to foreigners. If we ask what happens to Gross National Income, the actual income of US residents, it's not clear that that goes up at all.</p><p><strong><strong><div class="KonaFilter image-container display-table"><div><div class="image on-image"><p class="source"><span>Associated Press/Evan Vucci</span></p><p class="caption">President Donald Trump.</p></div><p></p></div></div></strong></strong></p><p>Barro</p><p>: That's interesting. Normally people talk about GDP, which is Gross Domestic Product, which is total economic activity within the United States. You're saying that the Gross National Product, which is the total economic activity that accrues to people in the US - including US profits from foreign activities, but excluding foreign owners from US activities - you're saying that could be negative even if GDP was positive?</p><p><strong>Krugman</strong>: Yeah. I mean, it's never been an important issue in the United States until now because the difference between GDP and GNP is trivial. But for economies that are smaller and have lots of foreign investment, it can be very big deal. Ireland, GNP is only 75% of GDP, because there's so much foreign ownership. Now, if this bill even does what it's supposed to, it kind of moves us towards being more like Ireland. We could see a headline GDP number that is up some, but is almost all offset by these increased payments to foreigners.</p><p><strong>Barro</strong>: One of the key arguments that Republicans have been making for this bill is that when you cut corporate taxes, you give big benefits to workers. Not just through economic growth, but they contend that a substantial fraction of the corporate taxes is actually paid by workers in effect because companies prefer to locate in places with lower corporate tax rates and will be willing to pay higher wages. Even that Tax Policy Center analysis that we were discussing, they assume that about 20% of the corporate tax is ultimately borne by workers. Is this right? Is there a significant benefit to workers from reduction of the corporate tax?</p><p><strong>Krugman</strong>: Probably some, a little bit. I mean, it matters a lot what horizon we're talking about. In the short run, nothing. All of this effect only works through capital coming in and building up and increasing the demand for labor. That takes time. If you ask what happens in the first year from a corporate tax cut, none of it goes to workers. Over the course of ten years, maybe a larger portion. But there are limits on how far this goes. So yeah, there's something there. Realistically we have to imagine there will be some effect, but will it be visible? Will workers see their wages increase in a way that anyone will notice over the next five years? No.</p><p><strong>Barro:</strong> So if the if the effects are small does that mean that sort of some of the doom and gloom about this bill from Democrats has been excessive? I mean, let's say it's going to add a few percentage points to public debt as a percentage of the economy 10 years from now. Interest rates are very low. It doesn't look to me like that there are likely to be significant crowd out effects from that. Are there significant downside risks from this bill? Is this going to hurt us, or does it just not matter very much?</p><p><strong>Krugman:</strong> I think probably it doesn't matter very much. I mean, it's not a good thing. You're supposed to use times when you're near full employment to pay down debt, not run up additional debt. Running up additional debt with most of it going to a very small number of people is a particularly bad idea. But if you ask 'Is there a crisis?' It seems unlikely. Just, you know, politically, I would love to say this is going to be a disaster, but I actually, when I try to work through it, I can't I can't convince myself that there's going to be much of a market reaction at all.</p><p><strong>Barro:</strong> So you don't ascribe the run-up in stocks to to this to this bill?</p><p><strong>Krugman:</strong> Oh, actually no. Look, stocks are up around the world. They're up by about the same amount all around the world. If you didn't know that the US numbers were US numbers and the European numbers were European numbers, and the Japanese, you wouldn't know which was which. There's a global stock boom, which is not particular to Trump. If you think there's a Trump bump you have to say there's a Merkel bump, and there's an Abe bump as well.</p><p><strong>Barro:</strong> How would you characterize economic performance right now? Is the economy good, and how much credit does President Trump deserve for how the economy's doing?</p><p><strong>Krugman: </strong>The economy's pretty good. In fact, it looks like we're close to full employment, although we don't know why wages aren't rising more. I think Trump gets essentially zero ... First of all, there have been no actual policies. There hasn't really been any policy change. The convention, usually, when people try to assess the economic impact of administrations, is to assume that the first year reflects the policies of the previous administration, so no there's nothing, nothing that is Trumpian about what's going on.</p><p><strong>Barro: </strong>Is there any possibility of sort of a self-fulfilling prophecy of economic improvement under Trump? Which is to say, immediately after he was elected, there was a big improvement in consumer sentiment, all from Republicans who thought that the economy was terrible, and then it turned around. And because Trump was going to be president they thought things would be really good. Could that be manifesting as, you know, more consumption, more business investment just because people feel confident in Trump's performance, if that could be something that itself causes the economy to improve?</p><p><strong>Krugman: </strong>Well the thing is the economy's been adding jobs at a steady rate for years now. If anything, the rate of job increases is leveling off, the curve is bending downwards. You can't see any Trump effect in there. And look, these issues with self-fulfilling confidence is a big deal when unemployment is 10%. Then the economy's performance is crucially dependent upon having enough spending out there. Where we are now, consumers get a lot more confident, the economy starts to grow faster, the Fed will raise rates faster, so it's kind of - we're not in that kind of universe anymore. That's a 2010 story. Not a 2017 story.</p><p><strong><strong><div class="KonaFilter image-container display-table"><div><div class="image on-image"><p class="source"><span>Joshua Roberts/Reuters</span></p><p class="caption">Jerome Powell.</p></div><p></p></div></div></strong></strong></p><p>Barro:</p><p>Let's talk a little bit about the Fed. Am I correct in saying that you think Jay Powell is a good pick to run the Fed, but you're concerned about some of the other choices that the President has made or might make about the Federal Reserve board?</p><p><strong>Krugman: </strong>Yeah, there was no good reason not to keep Janet Yellen. But Jay Powell appears to be a reasonable guy; there appears to be no significant policy error between him and the Yellen regime, which is fine. What I was afraid of was, given that Republicans have been insistently, and you know, defiantly wrong about everything monetary for the past 10 years, that they would make them having been wrong about everything be the criteria for being the chairman of the Fed. Well that didn't happen. Trump picked Powell who looks like he has been OK. The people who were now being floated for the Fed board do seem to fit that criteria.</p><p>We have Marvin Goodfriend, who is a reputable monetary economist with a tremendous track record, saying 'inflation is coming, inflation is coming! We must get ready to start raising rates now now now!' during ten years of a depressed economy.</p><p><strong>Barro: </strong>How much should we think of Fed policy as being driven by the on-the-record ideological statements of people who end up on the board? I mean, it seems like the chairman ends up having a lot of influence even though decisions are made by a vote of the board, and then also it feels like there's a lot of reaction to political and economic events. Once you get on the board, it becomes a lot costlier to be wrong about monetary policy than when you're someone just observing.</p><p><strong>Krugman: </strong>That has historically been the case. It's historically been the case that the staff plus the chairman ends up setting monetary policy and that that members of the board rarely will block the will of the chairman if it agrees with what the staff is saying. You can see that in both directions by the way. Ben Bernanke was a much more aggressive monetary Dove before he went to the Fed than he was afterwards. During the crisis we kept on saying 'if only Ben Bernanke would listen to Ben Bernanke.' Once you get to the Fed, there is an environment, but you know this is Trump's America. So maybe the old rules don't apply anymore.</p><p><strong>Barro: </strong>But Trump says he's a low-interest-rate guy ...</p><p><strong>Krugman: </strong>Sometimes, but he's been all over the place on that, but the question is to what extent are they ... Paul Ryan is an Ayn Rand monetary theorist who thinks that Atlas Shrugged contains all the rules for monetary policy. We don't know what's going to happen.</p><p><strong>Barro: </strong>Let's talk about trade. Do you worry at all about Trump's rhetoric on trade? What if he follows through on threats to withdraw from NAFTA or to start a trade war with China? What's the effect of that in the US?</p><p><strong>Krugman: </strong>The NAFTA issue I think is a really a huge issue, if it happens, which is probably why it probably won't happen. The thing about NAFTA is not so much who are the beneficiaries. I mean, I think United States benefits from NAFTA, but the main point there is that there's no such thing now as Mexican manufacturing and US manufacturing. There's North American manufacturing.</p><p>It's this tightly integrated complex of industries where stuff is shipped back and forth. Different pieces of an automobile are made all over the continent, and if you break that up, if you disrupt it, then we're talking about a lot of disruption at the industry level, we're talking about a lot of plants closing, new plants opening. It would be exactly the same sort of thing that people complained about from the growth of trade, except this time it's like the old joke about the motorist who runs over a pedestrian and says 'I'm sorry let me fix it,' so he backs off and runs over him again. That would be a hugely costly thing if we really disrupt NAFTA. That means that industry is horrified at the prospect. So in a way trade is going to be the test of whether there's any of that Trump Orthodoxy left. Is he willing to block the big companies on that?</p><p><strong>Barro: </strong>Regardless of whether there's a good remedy available to Trump, or whether the remedy that he's talking about makes any sense, is he right in his critique that free trade and relatively loose immigration policies have depressed the wages of native-born American workers over the last few decades?</p><p><strong>Krugman: </strong>Trade a little bit. Most estimates do suggest that increased International Trade did have some depressing effect on blue-collar wages in the United States. We import labor-intensive products, that reduces the demand. It's probably not huge, and it's probably mostly in the past. It's not a continuing force of further downward pressure. Immigration, actually, the evidence suggests that immigrant workers are not for the most part competing with native-born workers. They're competing with immigrant workers who are already here, more than that. Even though you take somebody with 11 years of education from Mexico or Central America, compare them with somebody with 11 years of education born here, they're actually very different, the skill sets, the occupations are very different. The immigration thing, although it's the one that resonated most with with Trump voters, is probably in fact the place where his economics is just wrong. He has a better case on trade.</p><p><strong>Barro: </strong>Finally I want to ask you about Bitcoin. Does the run-up in Bitcoin prices make any sense to you?</p><p><strong>Krugman: </strong>No.</p><p><strong>Barro: </strong>What's going on here?</p><p><strong>Krugman: </strong>Bitcoin ... nobody understands it. Which is, for the time being, a positive.</p><p><strong>Barro: </strong>A positive for the prices?</p><p><strong>Krugman: </strong>It's got this mystique about it because it's the some fancy technological thing that nobody really understands. There has been no demonstration yet that it actually is helpful in conducting economic transactions. There's no anchor for its value.</p><p><div class="KonaFilter image-container display-table"><div><div class="image on-image"><p class="source"><span><a href="http://www.gettyimages.com/license/461203344">Photo by Ethan Miller/Getty Images</a></span></p></div><p></p></div></div></p><p>Unlike pieces of paper with with dead presidents on them, those are anchored by the fact that you can use them to pay taxes. There's no anchor for bitcoin, but bitcoin has developed this mystique. Probably the price going on partly this tied up with libertarian stuff. I'm told that there are apocalyptic "the end is coming" guys who are accumulating Bitcoin, because once we turn into a Mad Max wasteland, having a digitally distributed ... nevermind.</p><p>I think it really doesn't make a whole lot of sense. And the psychology of it is clearly ... I mean, if you're using the shoeshine boy test, or 'my barber asked me about Bitcoin.' The feeling that that people are caught up in something that they really don't understand, is overwhelming.</p><p><strong>Barro: </strong>So you think this is an obvious bubble?</p><p><strong>Krugman: </strong>This is even more obvious I think than the housing bubble was and that one was, I thought tremendously obvious.</p><p><strong>Barro: </strong>Sometimes a bubble can be obvious and yet can persist for a long time. And in fact, I've been saying that Canadian housing is in a bubble for years, and it keeps going up. So the nice thing about calling a bubble is that if it doesn't burst you can always say 'well, it's just going to burst later.' I guess the question is how long can something like this go on with Bitcoin?</p><p><strong>Krugman: </strong>The thing about bitcoin is there isn't actually a whole lot of stuff. In a way, the fact that it's completely untethered to anything real, means that it doesn't fall until ... It can just hang there in mid-air for a long long time. It's not like housing prices. If housing prices are unrealistic, the more housing gets built, and you can see it. With Bitcoin, the cost of producing new bitcoins has gone crazy high, so that's not going to happen. We're waiting for a Wiley Coyote moment. Cartoon physics. He runs off the edge of a cliff and it's only when he looks down and realizes there's nothing under him that he goes *pchew.* So we're waiting forthat sort of thing to happen and that can go on for a long time.</p><p>A bubble is a natural Ponzi scheme, that's how Bob Schiller puts it, that as long as it's going on, everybody that bought in keeps making money, and it looks good. In the end, somebody's going to be left holding the bag. Everybody assumes it's not going to be them.</p><p class="tagline">Get the latest Bitcoin price <a href="http://markets.businessinsider.com/currencies/BTC-USD">here.&gt;&gt;</a></p>

We talked to Nobel Prize-winning economist Paul Krugman about tax reform, Trump, and bitcoin

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><p class="source"><span>REUTERS/Joshua Roberts</span></p><p class="caption">Janet Yellen.</p></div><p></p></div></div>The Federal Reserve's policy-setting committee left its benchmark interest rate unchanged at its two-day meeting.</p><p>It now expects to raise rates <a href="http://www.businessinsider.com/fed-dot-plot-march-2016-2016-3">twice this year</a>, down from its prior projection of four times, as it continues to monitor risks the global economy poses to its outlook.</p><p>Economists had widely expected that the Federal Open Market Committee (FOMC) would leave the rate in a range of 0.25% to 0.50%.</p><p>This was the second straight meeting when the FOMC made no change to interest rates since the first hike in nine years last December.</p><p>This was the Fed's reasoning, from its <a href="http://www.federalreserve.gov/newsevents/press/monetary/20160316a.htm">statement</a> (emphasis added):</p><p style="padding-left: 30px;"><span>The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will continue to strengthen. However, <strong>global economic and financial developments continue to pose risks. Inflation is expected to remain low in the near term</strong>, in part because of earlier declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of declines in energy and import prices dissipate and the labor market strengthens further. The Committee continues to monitor inflation developments closely.</span></p><p>The Fed lowered its outlook for the US economy. It expects GDP growth of 2.1% to 2.3%, down from 2.3% to 2.5%.</p><p><span></span><span>Its inflation forecasts were also reduced, with core personal-consumption expenditures (PCE) now expected in a range of 1.4% to 1.7%, from 1.5% to 1.7%. The Fed has a 2% inflation target.</span></p><p>The FOMC most likely did not rule out raising rates again during its meeting.</p><p>Since its <a href="http://www.businessinsider.com/federal-reserve-fomc-statement-january-2016-1">January statement</a>, data on the labor market and inflation have improved. Indeed, Wednesday's statement noted that the economy grew at a moderate pace.</p><p>But the Fed would also have considered that financial markets became extremely volatile after the December hike, even if it attributes the sell-offs to everything except itself.</p><p>And this volatility is one reason why the market's expectation for higher rates has been lower than the Fed's.</p><p>Following the statement, <a href="http://www.businessinsider.com/market-update-march-16-2016-3">stocks jumped after trading virtually flat</a> earlier.</p><p>Here's the full Fed <a href="http://www.federalreserve.gov/newsevents/press/monetary/20160316a.htm">statement</a>:</p><p style="padding-left: 30px;">Information received since the Federal Open Market Committee met in January suggests that economic activity has been expanding at a moderate pace despite the global economic and financial developments of recent months. Household spending has been increasing at a moderate rate, and the housing sector has improved further; however, business fixed investment and net exports have been soft. A range of recent indicators, including strong job gains, points to additional strengthening of the labor market. Inflation picked up in recent months; however, it continued to run below the Committee's 2 percent longer-run objective, partly reflecting declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.</p><p style="padding-left: 30px;">Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will continue to strengthen. However, global economic and financial developments continue to pose risks. Inflation is expected to remain low in the near term, in part because of earlier declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of declines in energy and import prices dissipate and the labor market strengthens further. The Committee continues to monitor inflation developments closely.</p><p style="padding-left: 30px;">Against this backdrop, the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent. The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.</p><p style="padding-left: 30px;">In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.</p><p style="padding-left: 30px;">The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction, and it anticipates doing so until normalization of the level of the federal funds rate is well under way. This policy, by keeping the Committee's holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.</p><p style="padding-left: 30px;">Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; James Bullard; Stanley Fischer; Loretta J. Mester; Jerome H. Powell; Eric Rosengren; and Daniel K. Tarullo. Voting against the action was Esther L. George, who preferred at this meeting to raise the target range for the federal funds rate to 1/2 to 3/4 percent.</p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/how-exchange-rates-actually-work-2015-7">These are the 6 factors that move exchange rates</a></h3>        <div>            <div>        <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="gxaHc4djr4FSeBb3d2ulPzCPEEaDgXTZ" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>        </div>        </div>            </div>

Fed holds rates, says the global economy is still in peril

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"></div><p></p></div></div>Being with someone for a long time changes the way you see the world. It also changes you. Everything from how you act to the way you think shifts in ever-so-slight ways.</p><p>And according to Joshua Wolf Shenk, the author of <a href="http://smile.amazon.com/Powers-Two-Finding-Innovation-Creative/dp/0544031598/ref=smi_www_rco2_go_smi_2072681322?ie=UTF8&amp;%252AVersion%252A=1&amp;%252Aentries%252A=0">"Powers of Two,"</a> these tiny shifts are also the catalyst for a different kind of thought process - a shared mind, so to speak - that allows couples (romantic or not) to come up with more creative solutions to problems than they'd ever think up on their own.</p><p>Here are some of the signs psychologists have observed that they say characterize such a shared mind.</p><h2>1. You and your partner develop your own private language.</h2><p>Ever get a text from your significant other that means absolutely nothing on its own but carries a certain significance that you can't quite explain? </p><p>This "insider" language is one of the first signs that the two of you are operating in sync, writes Shenk. According to <a href="http://onlinelibrary.wiley.com/doi/10.1111/j.1460-2466.1981.tb01201.x/abstract">a study from University of Texas professor of communication Robert Hopper</a>, secret communication accomplishes two things: First, it helps deepen your bond - romantic or platonic. Second, it establishes a unique, shared identity. </p><p>Private language can include everything from inside jokes to nicknames, <a href="http://spr.sagepub.com/content/10/4/609.full.pdf">writes Ohio State University psychologist Carol Bruess in a study</a> of romantic couples. Bruess' research suggests a link between how often partners use these private words and how satisfied they are with their relationship. <span style="line-height: 1.5em;">Bruess found that the more often couples used secret words and phrases, the happier they tended to say they were. </span></p><h2>2. You stop self-censoring.</h2><p class="p1">The way most of us speak with strangers, acquaintances and even close friends is markedly different from how we talk when we're alone with our partner.</p><p class="p1">When we're with others, most of us "<a href="http://www.communicationcache.com/uploads/1/0/8/8/10887248/self-monitoring-_appraisal_and_reappraisal.pdf">self-monitor</a>." That is, we <span>try to please the people around us by </span><span>adapting our behavior to suit theirs.</span></p><p class="p1"><span>But when we're with an inmate partner, we let go of this pattern of behavior and instead "</span><span style="line-height: 1.5em;">talk fluidly and naturally," Shenk writes. In other words, we stop having to constantly check ourselves before we speak. We're more candid and more open. </span></p><p class="p1">Many of the pairs Shenk talks to in his book have such a relationship. University of California Berkeley psychologist Daniel Kahneman, for example, tells Shenk: "Like most people, I am somewhat cautious about exposing tentative thoughts to others." But after he'd spent a few years working with his research partner, cognitive psychologist Amos Tverksy, "this caution was completely absent."</p><h2>3. You start to sound alike.</h2><p class="p1">In addition to having their own private vocabulary, long term couples eventually "start to match each other in the basic rhythms and syntactical structures of their speech," writes Shenk.</p><p class="p1">Part of that is a result of a phenomenon that psychologists call "<a href="http://www.lessicom.it/wp-content/uploads/2011/12/Emotional-contagion1.pdf">emotional contagion</a>." Basically, when two people spend enough time together, they begin to match each other's speech patterns. We mimic everything from the other person's accent to the amount and length of pauses he or she puts between words and sentences.</p><p class="p1">There's some evidence to suggest that these changing speech patterns can even serve as one indicator of how long a couple might stay together.</p><p class="p1">Part of a <a href="http://homepage.psy.utexas.edu/homepage/faculty/pennebaker/reprints/Ireland_et.al_LSM&amp;relationships.pdf">2010 study</a> of language use among couples that looked at couples' text messages, for example, found that when two people "sounded" more alike (in terms of the words and language structure they used in their messages) they were also more likely to still be dating three months later.</p><h2>4. You start to look alike.</h2><p>In his influential <a href="http://annenberg.usc.edu/Faculty/Communication%20and%20Journalism/~/media/5E42CEB22F0C450A8AA531ECB71E27FD.ashx">1987 study</a>, psychologist Robert Zajonc found that there's a very obvious reason that married couples start to look alike: They use the same muscles so often that, over time, they start to mirror each other. </p><p>This coordination of movement isn't accidental, says Shenk. Instead, it "reflects what psychologists call a '<a href="http://onlinelibrary.wiley.com/doi/10.1111/j.1756-8765.2009.01021.x/full">shared coordinative structure</a>' which includes how we harmonize our gaze, body sway, and the little mannerisms and idiosyncrasies of how we speak.</p><h2>5. You have a bunch of inside jokes that no one else thinks are funny.</h2><p>Research suggests that couples are more likely to mirror each other's body language - which in turn makes them look alike - because they're drawing from a wealth of knowledge that only they share. This "insider info" - all of your shared experiences and memories - informs your gestures, posture, and the words and phrases you use with each other. </p><p>A <a href="http://www.ncbi.nlm.nih.gov/pubmed/17576280">2007 study</a>, for example, found that <span style="line-height: 1.5em;">people were more likely to copy each other's eye gaze when they'd both heard the same background information before their conversation. </span></p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/esther-perel-how-to-make-relationships-work-thrive-home-office-2015-3">The 6 basic elements of a thriving relationship</a></h3>        <div>            <div>        <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="1laWozdDr_qWRIveSaMZJxlvsraeJdyC" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>        </div>        </div>            </div>

Science says these 5 things happen to couples who have been together a long time

2020 IPL auction will see these 332 players trying their luck under the hammer

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><p class="source"><span><a href="https://www.youtube.com/watch?v=rQebmygKq7A">CBS / 60 Minutes / YouTube</a></span></p><p class="caption">Apple CEO Tim Cook</p></div><p></p></div></div>One day after Georgia Governor Nathan Deal <a href="http://www.businessinsider.com/salesforce-ceo-won-his-georgia-showdown-2016-3">agreed to veto a bill</a> that critics said would have encouraged discrimination against gay people, a similar fight in North Carolina has ramped up. </p><p>On Tuesday, over 80 CEOs and business leaders signed an open letter asking North Carolina Governor Pat McCrory to repeal a controversial law <a href="http://www.businessinsider.com/ap-nc-lawmakers-return-to-address-transgender-bathroom-measure-2016-3">passed last week.</a></p><p>Signatures included Apple CEO Tim Cook, IBM CEO Ginni Rometty, Facebook CEO Mark Zuckerberg and, naturally, Salesforce CEO Marc Benioff, who has been the Silicon Valley point-person speaking out against state-level laws that negatively impact the LGBT community.</p><p>The law, which was passed by North Carolina's legislature in a one-day session and immediately signed into law by the governor, has been called <a href="http://www.businessinsider.com/nc-ag-wont-defend-controversial-transgender-law-2016-3">a "national embarrassment"</a> by North Carolina's <span>attorney general. </span></p><p>The law was in reaction to a regulation passed by the city of <span>Charlotte that allowed transgender people to use bathrooms based on their gender identity. </span><span>The new state law requires people to use the bathrooms based on their biological sex.</span></p><p><span>But it goes beyond regulating bathroom use and prevents local governments from passing regulations that eliminate discrimination based on sexual orientation or identity, according to a lawsuit <a href="http://www.npr.org/sections/thetwo-way/2016/03/28/472164084/aclu-sues-over-north-carolinas-law-blocking-anti-discrimination-legislation">that's already been filed by the ACLU</a></span><span>.</span></p><p><span>The business community, particularly the tech community, and Hollywood are up in arms about the law.</span></p><p>Here's the letter:</p><p style="padding-left: 30px;">Dear Governor McCrory,</p><p style="padding-left: 30px;">We write with concerns about legislation you signed into law last week, HB 2, which has overturned protections for LGBT people and sanctioned discrimination across North Carolina. Put simply, HB 2 is not a bill that reflects the values of our companies, of our country, or even the overwhelming majority of North Carolinians.</p><p style="padding-left: 30px;">We are disappointed in your decision to sign this discriminatory legislation into law. The business community, by and large, has consistently communicated to lawmakers at every level that such laws are bad for our employees and bad for business. This is not a direction in which states move when they are seeking to provide successful, thriving hubs for business and economic development. We believe that HB 2 will make it far more challenging for businesses across the state to recruit and retain the nation's best and brightest workers and attract the most talented students from across the nation. It will also diminish the state's draw as a destination for tourism, new businesses, and economic activity.</p><p style="padding-left: 30px;">Discrimination is wrong and we believe it has no place in North Carolina or anywhere in our country. As companies that pride ourselves on being inclusive and welcoming to all, we strongly urge you and the leadership of North Carolina's legislature to repeal this law in the upcoming legislative session.</p><p style="padding-left: 30px;">Sincerely, <br />Karen Appleton, Senior Vice President, Box <br />Brandee Barker, Cofounder, The Pramana Collective <br />Marc Benioff, CEO, Salesforce <br />Chip Bergh, President and CEO, Levi Strauss &amp; Co.<br />Michael Birch, Founder, Blab <br />Ed Black, President and CEO, Computer &amp; Communications Industry Association <br />Nathan Blecharczyk, Cofounder and CTO, Airbnb <br />Steven R. Boal, CEO, Quotient Technology Inc. <br />Lorna Borenstein, CEO, Grokker <br />Brad Brinegar, Chairman and CEO, McKinney <br />Lloyd Carney, CEO, Brocade Communications Systems, Inc. <br />Brian Chesky, CEO, Airbnb <br />Ron Conway, Founder and Co-Managing Partner, SV Angel <br />Tim Cook, CEO, Apple <br />Dean Debnam, Chairman and CEO, Workplace Options <br />Jack Dorsey, CEO, Square and Twitter <br />David Ebersman, Cofounder and CEO, Lyra Health <br />Jared Fliesler, General Partner, Matrix Partners <br />Joe Gebbia, Cofounder and Chief Product Officer, Airbnb <br />Jason Goldberg, CEO, Pepo <br />Alan King, President and COO, Workplace Options <br />Kristen Koh Goldstein, CEO, BackOps <br />Mitchell Gold, co-founder and chair-man, Mitchell Gold + Bob Williams <br />John H. Graham IV, President and CEO, American Society of Association Executives <br />Logan Green, CEO, Lyft <br />Paul Graham, Founder, Y Combinator <br />David Hassell, CEO, 15Five <br />Charles H. Hill III, Executive Vice President, Worldwide Human Resources, Pfizer Inc. <br />Reid Hoffman, Chairman, LinkedIn <br />Robert Hohman, Cofounder &amp; CEO, Glassdoor <br />Drew Houston, CEO, Dropbox <br />Chad Hurley, Cofounder, YouTube <br />Dave Imre, Partner and CEO, IMRE <br />Dev Ittycheria, President &amp; CEO, MongoDB <br />Laurene Powell Jobs, President, Emerson Collective <br />Cecily Joseph, VP Corporate Responsibility and Chief Diversity Officer, Symantec Corporation <br />David Karp, Founder and CEO, Tumblr <br />Travis Katz, Founder and CEO, Gogobot <br />Brian Krzanich, CEO, Intel <br />Joshua Kushner, Managing Partner, Thrive Capital <br />Max Levchin, CEO, Affirm <br />Dion Lim, CEO, NextLesson <br />Shan-lyn Ma, CEO, Zola <br />Marissa Mayer, President and CEO, Yahoo <br />Melody McCloskey, CEO, StyleSeat <br />Douglas Merrill, CEO, Zestfinance <br />Dyke Messinger, President and CEO, Power Curbers Inc. <br />Hari Nair, Vice President and General Manager, Orbitz.com &amp; CheapTickets.com <br />Michael Natenshon, CEO, Marine Layer <br />Alexi G. Nazem, Cofounder and CEO, Nomad Health <br />Laurie J. Olson, EVP, Strategy, Portfolio and Commercial Operations, Pfizer Inc. <br />Bob Page, Founder and CEO, Replacements, Ltd. <br />Michelle Peluso, Strategic Advisor and former CEO, Gilt <br />Sundar Pichai, CEO, Google <br />Mark Pincus, Founder and Executive Chairman, Zynga <br />Hosain Rahman, CEO, Jawbone <br />Bill Ready, CEO, Braintree <br />Evan Reece, CEO, Liftopia <br />Stan Reiss, General Partner, Matrix Partners <br />John Replogle, CEO, Seventh Generation <br />Virginia M. Rometty, Chairman, President and CEO, IBM Corporation <br />Dan Rosensweig, CEO, Chegg <br />Kevin P. Ryan, Founder and Chairman, Alleycorp <br />Bijan Sabet, General Partner, Spark Capital <br />Julie Samuels, President, Engine <br />George A. Scangos, PhD, CEO, Biogen <br />Dan Schulman, President and CEO, PayPal <br />Adam Shankman, Director and Producer <br />Gary Shapiro, President and CEO, Consumer Technology Association <br />David A. Shaywitz, MD, PhD, Chief Medical Officer, DNAnexus <br />Ben Silbermann, CEO, Pinterest <br />Brad Smith, President and Chief Legal Officer, Microsoft <br />Arne Sorenson, President and CEO, Marriott International <br />David Spector, Cofounder, ThirdLove <br />Jeremy Stoppelman, CEO, Yelp <br />Bret Taylor, CEO, Quip <br />Todd Thibodeaux, CEO, CompTIA <br />David Tisch, Managing Partner, BoxGroup <br />Nirav Tolia, Cofounder and CEO, Nextdoor <br />Kevin A. Trapani, President and CEO, The Redwood Groups <br />Ken Wasch, President, Software &amp; Information Industry Association <br />Bob &amp; Harvey Weinstein, Co-Founders and Co-Chairmen, The Weinstein Company <br />Mark Zuckerberg, Founder and CEO, Facebook</p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/peter-bergen-terrorists-reasons-isis-brussels-2016-3">Terrorism expert reveals 4 key reasons people become violent extremists</a></h3>        <div>            <div>        <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="E3eW5hMjE6SgUisggnJ72OAAAoK05LjG" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>        </div>        </div>            </div>

Tim Cook, Mark Zuckerberg, Ginni Rometty, others are asking North Carolina to repeal its 'discriminatory' law

<p><div class="KonaFilter image-container float_right"><div class="image on-image"></div><p></p></div>As the dust has settled on <a href="http://www.businessinsider.com/sweet-briar-college-will-stay-open-2015-6">the 11th-hour deal that will hopefully keep Sweet Briar College alive</a> for at least another year, it's become clear that the college's supporters are not out of the woods yet.</p><p>When Sweet Briar's leadership announced in March that the 114-year-old women's college would shut its doors for good this summer, a number of immediate problems plaguing the school came to the surface.</p><p>Those problems included declining enrollment trends and a shrinking endowment that, while still sizable, seemed unable to sustain.</p><p><span>As part of the deal to save Sweet Briar, the school's old leaders will leave the college. </span><span style="line-height: 1.5em;">But now their replacements are left with some tough choices.</span></p><p>In <a href="https://www.insidehighered.com/views/2015/06/22/essay-what-sweet-briar-will-need-do-thrive-future">an essay at Inside Higher Ed</a>, Alice Brown, president emerita of the Appalachian College Association, notes that some of the aspects that made Sweet Briar so attractive to potential students - and so meaningful to the alumnae who raised millions of dollars to save it - are also a major financial burden on the college.</p><p>"Will the college keep its 54 horses, costing $27,000 a month in food and $36,500 a month for care? Will it find the $28 million needed for deferred maintenance on its once grand buildings? Will the student-faculty ratio become higher than eight to one?" Brown asks.</p><p>The college's small class sizes are a serious drain on its finances that might not be immediately evident to outside observers.</p><p>"Sweet Briar's model of providing highly personalized <keyword id="6355445" type="COMPANY" weightage="100" keywordseo="Education">education</keyword> with small class sizes is expensive, as indicated by educational expenses per student of approximately $42,000," <a href="https://www.insidehighered.com/news/2015/06/22/deal-will-save-sweet-briar-college">according to a recent Moody's report on the college</a>.</p><p>Sweet Briar could cut costs by offering online courses, a prospect that the college has rejected in the past. <span style="line-height: 1.5em;">Brown, in her IHE essay, points out a 2011 article in a campus publication that asked the question, </span><a href="http://sbvoice.blog.sbc.edu/2011/10/27/should-sweet-briar-offer-online-education/">"Should Sweet Briar Offer Online Education</a><span style="line-height: 1.5em;">?"</span><span style="line-height: 1.5em;"> T</span><span style="line-height: 1.5em;">he answer, from students and administrators, seemed to be a resounding "no."</span></p><p>"Sweet Briar is a traditional residential liberal arts college. We don't have any need to do business with online classes. The education would not be the same, especially for foreign language students. The isolation that online classes create also collides with the teaching philosophy of Sweet Briar which is to provide education in small, discussion based classes in an intimate and strong community," Sweet Briar's registrar, Deborah Powell, said, according to the campus publication.</p><p>This view may have been shortsighted. As Brown argues, "the reality is that education at Sweet Briar is not the same it once was, and it is likely to move even farther away from that utopian state."</p><p><div class="KonaFilter image-container display-table"><div><div class="image on-image"></div><p></p></div></div></p><p>In <a href="https://www.insidehighered.com/blogs/technology-and-learning/edtech-advice-sweet-briar">a separate essay at IHE</a>, Joshua Kim, the Director of Digital Learning Initiatives at the Dartmouth Center for the Advancement of Learning, outlines the direct benefits of online education for the struggling liberal arts college.</p><p>"The reason to develop a blended / low-residency / online strategy is that such a strategy is the only way to ensure long-term economic sustainability," Kim writes. "Providing other learning options beyond only face-to-face will both benefit existing students, make enrolling in Sweet Briar more attractive, and open the door to new programs and new students."</p><p>Outside of the classroom experience, one of Sweet Briar's calling cards has been its undeniably stunning campus, which encompasses 3,250 acres in the foothills of the Blue Ridge Mountains. In <a href="http://chronicle.com/article/Let-s-Make-This-Work-/231097/">an interview with The Chronicle of Higher Education</a>, incoming Sweet Briar president Phillip C. Stone cites the school's surroundings as one of the most "attractive features" for potential students.</p><p>"The beautiful, parklike grounds, the ability to study in such a serene, pastoral environment - we want to talk about these as positives," Stone said.</p><p>The fate of this campus, though, will likely be decided in the upcoming months and years. While 27 acres of Sweet Briar's campus are a historic district - along with 21 of its buildings - <a href="http://www.businessinsider.com/sweet-briar-college-campus-financial-asset-2015-4">the remaining thousands of acres could be part of the key to keeping the college open for the future</a>.</p><p>"The possibility of creating a planned residential and/or commercial community on property owned by Sweet Briar College is significant and could result in substantial sums to the College," according to John W. Gibb, the managing director of a higher education and real estate financial firm and former chairman of the Wilson College Board of Trustees. Gibbs shared this view in a statement supporting one of the lawsuits against the college.</p><p>The college's upcoming leadership will almost certainly consider developing Sweet Briar's campus. Gen. Charles C. Krulak, a former commandant of the US Marine Corps and current president of Birmingham-Southern College, made a similar argument in a separate statement attached to the lawsuit. He's now tapped to be a new member of Sweet Briar's board.</p><p><div class="KonaFilter image-container display-table"><div><div class="image on-image"></div><p></p></div></div></p><p>While potential changes that could affect Sweet Briar's culture may be unpopular, they may also be necessary.</p><p>"Nostalgia is no substitute for a sound financial plan," <a href="https://www.insidehighered.com/news/2015/06/22/what-case-sweet-briar-means-other-colleges">a former board member of three private colleges told IHE</a>.</p><p>Unfortunately for Stone and the new Sweet Briar board, the school needs continued alumnae support and donations to survive in the long run. Even if Sweet Briar maintains enough of the college's original allure to entice alumnae to give, there is a lingering concern that funds have been "tapped out" in the recent push that ended up raising millions of dollars in pledges.</p><p>"Once you say that out of passion you're going to make the most generous, sacrificial gift I can make, it's pretty hard to keep doing that year after year," Stone told The Chronicle. "So we'll have to work at that, and it will be hard to sustain it."</p><p>This could be even harder than Stone anticipates, as any shift that Sweet Briar makes may, paradoxically, end up isolating the very people who worked tirelessly the past few months to save the school.</p><p>"One issue that might present difficulties for any development office is that of gathering donations to make the college an institution of the 21st century when most of those being solicited graduated during the 20th century and want the college to preserve the culture it once enjoyed," Brown writes.</p><p>While Brown notes this is an issue affecting pretty much any college, the significant changes likely needed at Sweet Briar could seriously change the character of the school.</p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/new-omega-globemaster-watch-unboxing-2015-5">Forget the Apple Watch - here's the new watch everyone on Wall Street wants</a></h3>        <div>            <div>        <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="5iaDNwdDrYYMm2yipFb14ndbRkPnemqO" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>        </div>        </div>            </div>

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